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10/26/2012

Monopoly on...us

As we are working on exercises concerning monopoly, this story on patenting human body caught my attention. Since the 1980 Supreme Court decision allowed for patenting of human-made microorganism, there has been a deluge of patents on our cells and genes by the pharmaceutical companies.

One of the story concerns John Moore, a cancer patient who has had cells extracted from his body, ostensibly for the cancer treatment he is receiving. What he wasn't told however, was that his cells could be enormously profitable as the basis of some next-generation pharmaceutical. However when he sued over the rights of his cells, the California Supreme sided with the University of California, the public school who employed the researcher that took his cells.

I can understand and even appreciate the need to give incentives to certain monopolies. Faced with enormous fixed costs in research and development, the government grants exclusive rights to companies with breakthrough patents to earn an economic profit over a number of years as to encourage research. However this practice has led to the unforeseen effect of using patents to exert exclusive control on genes, cells, and other biological material to prevent other companies from engaging in competing research. Economic profit and government patents now perversely stand in the way of new discoveries, not to mention the very scary slippery slope of patenting pieces of the very building blocks of people.

5 comments:

I agree with Moh that the parts of the human body can be profitable, but should it? My feelings are that in a way it would be a good thing to create this market. It would save many lives. It would also cut down on the wait time for the person who needs an organ transplant. However, what if that organ is rejected by the body of the recipient of that organ? Then the person must take a drug to keep the body’s response mechanism for shutting down that organ. I strongly believe that there are some bad things about a Human Organ market. The market could raise the price high enough that the poor and uninsured people in Russia could not afford the necessary organs. This could make people sell their organs in the Black Market. Then there’s the moral obligation. There are people who will pay anything to anyone to get what they want. I know some people in my country that would sell their kidneys to pay their debts.

First, let me say that professionally I am befuddled by the problems we have with patents and copyrights, and their relation to technological advances. I am not sure at all how to go forward in this area.

Second, this problem can be broken down to an economic arbitrage problem. Consider the returns to an invention. Some returns are private and go to the inventor, and some are public and go to society as a whole. If private returns exceed social returns, people will invent too much dumb stuff that society doesn't need. Alternatively, if private returns are too low, people will not invent enough because they feel that their gains are being stolen. The arbitrage equilibrium is where the private and public return are the same. This gives us a metric to evaluate whether current policy is too restrictive or not. The answer may surprise you: private returns appear to be far smaller than public returns. This suggests that we need patent laws that allow inventors to earn far more generous returns than they already do.

Third: economists to the rescue! The Nobel Prize this year was awarded, in part, to Alvin Roth. Among many things he's done, one is to suggest a way to get around the moral problems that Julia raises, while still creating a functioning market. This is the idea of a kidney exchange (if you're interested, just look it up on Google).

A monopoly exists when a specific person or enterprise is the only supplier of a particular commodity (this contrasts with a monopsony which relates to a single entity's control of a market to purchase a good or service, and with oligopoly which consists of a few entities dominating an industry).Click Monopoly Review

I would add another point to Dr. Tufte’s perspective that we may actually need patent laws that offer inventors more incentives. Dr. Tufte makes the comment that “if private returns are too low, people will not invent enough because they feel that their gains are being stolen.” I would add to this that without the protection of patents, more researchers and “inventors,” as we are referring to them here, would withhold their findings from the scientific community. Patents do not stop the information about the human body from being shared in the community, rather patents encourage openness about research because they remove the fear of competitors exploiting and profiting from one another’s findings. Keeping findings secret could be more of a detriment to medical advancement.

Additionally, while some organizations may seek to unfairly profit from their patent monopolies, there are others that are more scientifically and ethically responsible. For instance, Human Genome Sciences’—an organization with one of the largest patent portfolios in the industry—claims this patent policy: “We do not use our patents to prevent anyone in academics or the nonprofit world from using these materials for whatever they want, so long as it is not commercial.”

Patents, despite problems they may cause, make sure that information is registered and shared. If companies kept the discoveries in this field they made as “trade secrets” it would only slow down the rate of scientific progress.

As to Julia’s comment, while Moh used the phraseology of “patenting the human body,” we must recognize that different parts of the human body (i.e. genes vs. organs) must inevitably require different policies and approaches. Taking up Dr. Tufte’s challenge to Google “kidney exchange” there is a fascinating paper here detailing a compelling economic model for an organ exchange that has quite compelling observations, evidence and conclusions.

Thanks for opening this discussion folks, I have enjoyed reading and thinking about this subject in more depth.